In Russia all thought of invading Georgia and growling at Europe was forgotten as the country became the first sovereign entity to be swamped under the wave of bad economic news this week.

For the third day in a row this week, the Government halted trading on the country’s two main stock exchanges to try and allow conditions to settle and the selling pandemonium to ease.

But that wasn’t enough and trading on the stockmarket was later stopped for a third day. It didn’t resume.

The two key markets, Micex and RTS, said they were suspending trading until further notice from the state’s main financial regulator after shares began to fall as a new wave of forced equity sales on margin calls consumed dealings and cash dried up.

Over $US700 billion in value has been wiped off Russian shares and it is the first stockmarket to freeze during the crisis, a situation reminiscent of the country’s default in 1998.

After more than a month of battling rising selling and capital outflows by foreign investors worried about Russian arrogance towards businesses and then the Georgia invasion, the Government was last week forced to start injecting funds into the financial system, and then to start buying shares.

But to no avail. The billions provided from the central bank and the state pension fund proved inadequate, even though more than $US70 billion by some accounts was injected into the financial system and billions more was spent buying shares. $US44 billion was injected Tuesday, to no avail.

Unlike the billions injected in Australia, Japan, the US and Europe, the Russian injections were aimed at supporting the stockmarket by buying shares, or trying to maintain liquidity in the money markets: it evaporated as fast as the Government funds arrived.

The Government extended easier credit terms to embattled banks and investors wondered if Russia was going to undergo a rerun of its default a decade ago last month. But that was something unfathomable given that Russia has built up around $US500 billion in foreign reserves from riding the commodity boom with high priced exports of oil, gas, nickel and other minerals.

And yet, it is seemingly illiquid as margin calls have crippled banks, investors and others. Some of the biggest names in Russian business may not survive and the cost of a UK soccer club will fall, as will French rugby clubs which have become expensive playthings for Russian “Oligarchs”.

And you can expect it to be bloody. Moscow reports in the Financial Times and other European media outlets say that a Moscow property group has frozen projects, a medium sized stockbroker called KIT Finance is struggling as some sort of bailout is being attempted and most worrying of all, a large local bank is said to have missed payments during the day and a rescue is underway.

This problem is believed to have been the reason for the decision to keep the stock exchanges shut for the rest of the day.

Moscow traders and analysts said settlement systems at both exchanges had failed Wednesday morning as panic selling set in, adding to the problems.

It’s much easier to invade a country, it seems, than to run an economy on an even keel.